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View related content: Environmental and Energy Economics
In the last two weeks of this year, the AEI 2011 series will highlight the institute’s work that has made an impact, made a difference and made headlines over the past year.
President Obama has made green jobs and alternative energy research and development a key fixture of his term. But are these efforts really the right course to stimulate job growth and increase America’s energy independence? With $2.3 billion in Recovery Act tax credits allocated for green manufacturers, AEI’s Ken Green looked at how proponents’ high expectations clash with both economic theory and practical experience in Europe.
It is well understood, among economists, that governments do not “create” jobs; the willingness of entrepreneurs to invest their capital, paired with consumer demand for goods and services, does that. All the government can do is subsidize some industries while jacking up costs for others. In the green case, it is destroying jobs in the conventional energy sector–and most likely in other industrial sectors–through taxes and subsidies to new green companies that will use taxpayer dollars to undercut the competition. The subsidized jobs “created” are, by definition, less efficient uses of capital than market-created jobs. That means they are less economically productive than the jobs they displace and contribute less to economic growth. Finally, the good produced by government-favored jobs is inherently a non-economic good that has to be maintained indefinitely, often without an economic revenue model, as in the case of roads, rail systems, mass transit, and probably windmills, solar-power installations, and other green technologies.
In 2009, Solyndra received $535 million in federal loan guarantees for construction of a commercial-scale manufacturing plant for its proprietary solar photovoltaic panels. In 2011, the company filed for bankruptcy, shuttered its operations and laid off all its workers. AEI’s Steve Hayward wrote that the scandal threatens to hurt the green-energy campaign:
The green energy lobby is probably hoping that Solyndra’s failure can be portrayed as an isolated case of illegal influence, lest it cast a shadow over the entire edifice of massive subsidies that green energy requires to survive. But Solyndra is merely the most spectacular of several recent green energy failures. And beyond the domain of green energy, the Solyndra fiasco is emblematic of the Obama administration’s economic philosophy, which harks back to the mid-20th-century hubris of state-planned enterprise. It is also fair to note that the origins of this fiasco predate the Obama administration, and illustrate the continuing incoherence and wishful thinking of U.S. energy policy.
MORE: “Obama tainted by loan guarantees to solar firms” by Michael Barone
“An anti-fracking philanthropist has turned environmentalists into precautionary conservatives. How did this happen?” Jon Entine dove into what happened to the “bridge to the future”:
While we are awash in natural gas skepticism over the mass scale feasibility of alternatives has escalated. Overflowing supplies destroy Big Green’s argument that fossil fuels will get more and more costly till even wind and solar power are competitive. That undermines the argument for massive subsidies of alternatives that may never deliver competitive bang for the buck. No longer is natural gas a bridge to the alternative energy future. Much to the chagrin of energy activists, natural gas now is the future.
The progressives’ former ally is now being cast as Public Enemy No. 1. Even though the vast majority of horizontal drilling and fracking occurs below water tables so aquifers are not affected, opponents are stirring up precautionary fears and NIMBY—not in my back yard—protests.
DON’T MISS: Hayward’s “Almanac of Environmental Trends,” which covers seven major indicators of environmental progress including air quality, energy, climate change, water quality, toxic chemicals, forests and land, and biodiversity.
Bridget Johnson is the managing editor of AEI.org
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